Weld County farmland values continue climbing

JIM RYDBOM/jrydbom@greeleytribune.com
Weld County agriculture land has continued to rise in value due to oil and gas companies, commodities prices and increased need for dairy farms. There are over 3,000 farms in Weld County with agriculture products creating over 1.5 billion of market value annually.

JIM RYDBOM/jrydbom@greeleytribune.com
Moisture rises from a field near Eaton on Thursday after a recent snow storm left the area with more snow. Farmers are waiting for their fields to dry out more before beginning to plant.

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One of the worst droughts on record may have decreased production on some farmground in Weld County, but it certainly didn’t lower the price tag on the land.

The upswing in farmland values seen during the recent years of high commodity prices remained in full swing last year.

Alan Duensing, an appraiser for American AgCredit in Greeley, said the average chunk of Weld County farmground under center-pivot irrigation sold for about $7,000 per acre during 2012 — about a 45 percent increase from 2011.

Other data from American AgCredit, which has offices in Greeley and across Colorado and other states, shows that land under flood irrigation in Weld sold for $6,800 per acre on average throughout 2012, up about 13 percent from the year before.

And pasture ground was selling for about $1,250 per acre on average last year, which is about an 18 percent upswing.

In addition to high commodity prices, the demand for Weld County land remains high and prices continue climbing upward due to the increased oil and gas activity on local ag ground (about 75 percent of Colorado’s oil and gas production is taking place in Weld) and because of the growth of the local dairy industry (the area needs 50,000-plus dairy cows to meet the demands of a new Leprino Foods cheese-processing plant in Greeley).

Also, today’s historically low interest rates have made farmers and ranchers more aggressive in buying ground, and that, too, has upped the demand and value of land, local farmers and bankers say.

Today’s potential for profits in farming and low lending rates have caused record-high land values elsewhere.

Duensing said American Ag Credit’s figures show that land under center-pivot irrigation in Yuma, Sedgwick and Phillips counties in eastern Colorado during 2012 sold for about 60 percent more than it did in 2011, while pasture ground saw about a 25 percent increase.

Preliminary findings from the 2013 Nebraska Farm Real Estate Market Developments Survey show that Nebraska’s all-land average value rose 25 percent over the 12-month period ending on Feb. 1.

According to that report, the 2013 all-land average value is more than double what it was just three years ago.

Last fall, an 80-acre parcel in Iowa sold for $21,900 per acre.

Like many things in agriculture, today’s high land values are a double-edged sword.

The high price tag is good for those who own land, but can cause headaches for the those who don’t and are trying to buy it or lease it.

With the average age of the U.S. farmer nearing 60, the ag industry has expressed concern about getting more young people into the profession, but doing so can be difficult now because of how much it costs to buy land.

Those who are farming on leased ground are seeing an increase in rent prices — adding to their list of increasing input costs.

Recent land rent figures for Colorado weren’t available, but in neighboring Nebraska, center-pivot irrigated cropland cash rental rates for 2013 were reportedly 13-15 percent higher than they were just a year earlier, according to a University of Nebraska-Lincoln report.

Farmers in Colorado say they’re seeing similar increases.

“We’re certainly seeing rent costs go up,” said Gabe Winter, who’s family owns, leases and shares crops farmground around Eaton. “But it’s not to a point where we can’t make money. At least not yet, anyway.”

Some concerns linger about a potential ag-land bubble burst, but many reports say any drop in land prices is unlikely to be as sharp as in the early 1980s — a time when land purchases were financed largely with debt and not so much with farmers’ own capital.

Land purchases during the last few years have been made with farmers using more of their own cash, according to a U.S. Department of Agriculture report, and the debt-to-asset ratio on farms is expected to be the lowest level on record in 2013.

Any drop in land prices now means farmers are losing the investment of their own cash, and aren’t deeply indebted to the local bank, and those factors are likely to limit the severity of any drop in farmland prices.

“Farmers today definitely seem to be using more caution,” Duensing said.